Hopes for new nuclear plants in the U.K. are fading fast after Hitachi halted development of a GBP £13 billion ($17 billion) project last week. The Japanese developer hit pause on the Wylfa Newydd nuclear power project, in Wales, over concerns about funding.
The move came after another Japanese nuclear vendor, Toshiba, scrapped plans for a separate plant, Moorside, in Cumbria, north England, last year. Hitachi claims the project has been paused, not stopped. But prospects remain uncertain.
As GTM previously reported, Japanese vendors have been struggling to seal international deals in the wake of the Fukushima Daiichi nuclear disaster in 2011. Hitachi's and Toshiba’s failures to move forward in the U.K. leave just three prospective new plants planned on British soil.
The most advanced, Hinkley Point C, is being built by the French state-owned developer EDF Energy. It is based on an Areva technology that has proven to be expensive and challenging to build. And the costs of the project have already been widely condemned.
Hinkley Point C was awarded a 35-year inflation-adjusted strike price, or agreed payment rate, of £92.50 per megawatt-hour in 2012 prices (about $120 per megawatt-hour at today’s exchange rate).
As renewables have plummeted in cost, though, that rate is starting to look a tad high. According to a government forecast made in 2017, the nuclear plant could end up costing British ratepayers up to £50 billion ($65 billion) over its lifetime, eight times its 2013 estimate.
Since Hinkley Point C is already being built, that’s a cost Britons will have to live with. But the expense has led to questions over whether further nuclear plants make sense in the U.K. when the country is able to gain new generation capacity more cheaply through renewables.
In a statement to Parliament last week, the U.K. Business and Energy Secretary Greg Clark said: “The economics of the energy market have changed significantly in recent years.”
The cost of renewable technologies such as offshore wind “has fallen dramatically,” he said, but “this positive trend has not been true when it comes to new nuclear. This has made the challenge of attracting private finance into projects more difficult than ever.”
Clark revealed the U.K. government had been willing to take a one-third equity stake in Wylfa, as well as providing all of the debt financing for the project and offering a strike price of £75 ($97) per megawatt-hour.
Hitachi’s director of corporate affairs, Leon Flexman, told the BBC that Hitachi had called a temporary halt on the project because it was costing £1 million ($1.3 million) a day, but the company would be willing to resume work if financing could be found.
The fact that even the generous package proposed by the U.K. government could not get the project off the ground does not bode well for Wylfa’s future, nor for the prospects of other new nuclear plants in the country.
Echoing sentiment in other papers, The Observer editorial wrote that Hitachi’s decision was “a major blow to Britain’s prospects of creating an effective energy policy for the 21st century.”
Wylfa and Moorside were due to supply 15 percent of the country’s electricity, it said — power that would have been delivered with no carbon emissions.
Their demise has called into question the funding model used for Hinkley Point C and formerly proposed for two remaining projects in the U.K.: Sizewell C, which EDF is supposed to start building in 2021, and Bradwell, which Chinese firm CGN is planning to commission in 2030.
Given that nuclear is due to take over baseload generation duties from Britain’s retirement-age coal fleet, Wylfa “also presents major questions for the credibility of the U.K.'s plans for electricity decarbonization,” said Dr. Jonathan Cobb of the World Nuclear Association.
Last week, Clark said the U.K. government was looking at a new financing scheme, called a regulated asset base model, for these and other plants. “We intend to publish our assessment of this method by the summer at the latest,” he said.
But observers aren’t holding out much hope. The European Wood Mackenzie Power & Renewables team issued an analyst note that states: “This is a major blow to the prospects of nuclear power in the U.K.”
Nuclear generation is expected to drop from 20 percent of the U.K.’s generation mix today to 10 percent by the mid-2030s, said the team, adding: “It looks increasingly doubtful that nuclear will be a major contributor to a heavily decarbonized power mix in the U.K.”